Like most people, you probably prefer not to think about the possibility that you, or a spouse, will end up in a nursing home at some point later in life. Ignoring the possibility, however, could have serious financial consequences, including the loss of a significant portion of your retirement nest egg. To prevent even the possibility of that happening, you need to plan ahead by including Medicaid planning in your comprehensive estate plan. If you have never before relied on Medicaid for help covering your healthcare expenses, you may wonder why you need to include Medicaid planning in your estate plan now. A better understanding of the costs involved in nursing home care, and your options for help covering those costs, will shed some light on the need for Medicaid planning.
I’m Too Young to Worry about Nursing Home Care
One of the biggest estate planning mistakes people make is thinking they are too young to worry about things such as the possibility of becoming incapacitated or the eventual need for nursing home care. The time to plan for nursing home care is well before you actually need the care, not when the need for care is eminent. By the time you enter your retirement years (around age 65) you will already stand a 50-50 chance of eventually needing some type of long-term care (LTC). Every year that goes by increases those odds. If you do eventually need nursing home care, and you turn to Medicaid for help covering the cost of that care, you will find that your assets may be at risk if you failed to plan ahead.
How Expensive Is Nursing Home Care?
You probably know that nursing home care is costly, but do you realize just how costly? Nationwide, a year in LTC averages about $80,000. If you live in Massachusetts, you can expect to pay, on average, $140,000 a year for nursing home care. New Hampshire residents do not fare much better with an annual average of about $120,000 for LTC. After factoring in the average length of a stay in LTC – 2.5 years – the average Massachusetts nursing home bill comes in at a staggering $350,000. New Hampshire is not far behind at $300,000.
Medicaid May Be Your Only Hope for Help
Throughout your working years, you have likely relied on your employer sponsored, or privately funded, health insurance benefits to cover healthcare related bills. You may also be operating under the assumption that Medicare will step in and take over where your healthcare insurance leaves off. It is true that Medicare will cover the majority of your healthcare related expenses as a senior; however, Medicare will not cover LTC expenses unless they follow and inpatient stay at the hospital. Even under those circumstances Medicare will only cover up to 100 days of LTC. The good news is that Medicaid will cover your nursing home costs – if you qualify for benefits
Qualifying for Medicaid – Why Incorporating Medicaid Planning into Your Estate Plan Is So Important
Medicaid eligibility is based, in large part, on your income and the value of your “countable resources.” The countable resources (asset) limit is where most seniors find themselves in trouble if they did not plan ahead. Although some assets are exempt from consideration, such as your home, with a countable resources limit as low as $2,000 it is easy to see how an applicant can exceed the limit. Moreover, you cannot simply transfer assets in anticipation of applying for Medicaid because the program employs a five-year “look-back” rule. The rule allows Medicaid to review your finances for the five-year period leading up to your application. Any asset transfers for less than fair market value will likely be discounted and the value of the assets imputed back into your estate for purposes of determining eligibility. If your resources exceed the limit, Medicaid will impose a waiting period during which time you will be expected to “spend-down” your assets until the reach the limit. Essentially, you will be expected to sell your “excess” assets and use the proceeds to pay your LTC expenses during the waiting period.
The solution to this dilemma is to include Medicaid planning in your comprehensive estate plan well ahead of time so that when the time comes that you need to qualify for Medicaid you are eligible right away.
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns related to nursing home care or Medicaid planning in Massachusetts, contact the experienced Massachusetts estate planning attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.